AudioNet grows, despite controversy with hearing aid professionals

AudioNet America is riding a changing hearing-aid industry to rapid growth as employers and other payers aim to lower costs.

Managed care group purchasing has caught on in the multibillion-dollar industry. That has helped Clinton Township, Mich.-based AudioNet to expand the number of people its services cover by 660% to 800,000 in the past year by adding a number of state and national contracts, said Colleen Shefferly, the company's president.

Earlier this year, AudioNet, a third-party network administrator Shefferly founded in 2007, was awarded a $12 million contract for hearing aids by the state of Michigan's Rehabilitation Services program, which helps people with disabilities get back to work.

"We have been growing very rapidly the past year as patient satisfaction improves because of better (hearing aid) technology," Shefferly said.

Shefferly, a longtime consultant with the United Auto Workers, said she founded AudioNet because automakers, unions and health plans were looking for ways to reduce costs, improve hearing care and increase options for workers and retirees.

AudioNet's national provider network offers annual hearing assessments by more than 5,000 audiologists under contract for a flat fee. Two hearing aids are offered every three years.

Before flat fees were negotiated, Shefferly said the benefits structure for the UAW often resulted in patients being balance-billed $3,000 to $8,000 for a pair of hearing aids. Now, AudioNet saves companies up to 51% over their previous bills.

"We are totally medically focused. People who have hearing loss also sometimes have high blood pressure, diabetes and other conditions like general depression," she said. "We encourage people to use hearing aids so their quality of life is better."

The high cost of hearing aids has prompted Congress to act. Pending federal legislation would allow for the sale of hearing aids, which average about $5,000 for a pair, over the counter for people with mild to moderate hearing loss.

Proposed by Sens. Elizabeth Warren (D-Mass.) and Chuck Grassley (R-Iowa) in the Senate and Reps. Joe Kennedy III ( D-Mass.) and Marsha Blackburn (R-Tenn.) in the House, the "Over the Counter Hearing Aids Act" would order the Food and Drug Administration to open the market.

Shefferly said AudioNet is neutral on the legislation, but she said the bill's purpose is similar in intent as the company — to lower costs and improve outcomes for people with hearing loss.

AudioNet also contracts with the UAW Retiree Medical Benefits Trust, also known as the UAW Trust, and active union employees with General Motors Corp. and Chrysler Corp., Shefferly said. The company also is expected to soon finalize a preferred vendor arrangement with Blue Cross and Blue Shield of Michigan.

Shefferly declined to name other customers, citing confidentiality.

But by 2018, Shefferly projects her company will double to more than 2 million clients as the company signs additional commercial health plan contracts and enters into deals with unions outside of the auto industry. People also are losing their hearing at an earlier age, in their early 70s, she said.

Ron Berry, chief administrative officer with the UAW VEBA, declined to comment on vendor contracts such as AudioNet's. However, UAW VEBA spokesmen in the past have said generally that their vendor contracts are saving the trust millions of dollars.

AudioNet employs 12 workers and expects to grow to about 30 by the end of 2018, Shefferly said. The company outsources information technology, member services and third-party administration to Michigan companies, Shefferly said.

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Some providers unhappy

Not everyone is supportive of AudioNet, however. Officials and members of the Michigan Alliance of Hearing Care Professionals, which represents audiologists and the retail hearing aid dispensers, say AudioNet has unfairly interfered with its members' business models and reduced access to care for the hard of hearing.

Laura Szot, president of the Michigan Alliance, said AudioNet's managed-care network has excluded some audiologists and hearing instrument specialists. Before AudioNet, most UAW union workers had open access through Blue Cross and Blue Shield of Michigan's network.

Szot said some customers who received hearing tests and hearing aids at businesses owned by hearing instrument specialists were forced to find other companies when AudioNet began restricting services.

"This meant many consumers who were happy with their providers had to seek out new providers and many practices who had a lot of UAW consumers lost a great many of their clients," Szot said. "This had a very negative effect on these businesses as well as it reduced access to provider options and hours of service availability for UAW members."

Szot said many businesses owned by dispensers had to close because they did not employ an audiologist or only had one part-time.

Shefferly said this happened because AudioNet does not allow hearing aid dispensers to bill for services unless they are directly employed by an audiologist. She said this rule is intended to combat fraud.

"Sometimes dispensers owned the (business) and say there is an audiologist there," she said. "We would get improper claims because a dispenser would employ the audiologist who would sign off on claims. We don't allow that."

Shefferly said a hearing aid dispenser can be employed and credentialed by AudioNet, but only through an audiologist who is required to perform the exam and evaluation. AudioNet also doesn't allow dispensers to file claims if they are employed by a hearing aid manufacturer.

Another reason AudioNet only credentials audiologists—along with ear, nose and throat physicians—is because Medicare is moving to require professional accreditation for reimbursement, Shefferly said.

"Holding the audiologist and ENT responsible for the claim ensures quality and eliminates fraud," Shefferly said.

Szot also said that AudioNet's subcontracted provider networks have cut fees paid to audiologists.

Under the Blue Cross program, Szot said dispensing companies were paid $1,500 for a single hearing aid plus $200 in testing services. But AudioNet's reimbursement rate dropped to $700 for a pair of midlevel digital hearing aids, she said.

"Our membership has shared that (provider reimbursement) is significantly reduced from the previous model," Szot said. "It is unclear currently if the UAW Trust is saving money or if manufacturer reimbursements have been reduced, but for providers there was a significant reduction."

In a Sept. 27, 2016, letter obtained by Crain's Detroit Business, however, the UAW said AudioNet has saved the union 50% of costs that has allowed members to receive up to two hearing aids per year instead of one.

Shefferly said she hears complaints sometimes that claims paid are slow. "By contract, 95% are paid in less than 10 days," she said. "(Networks) may pay their providers late. I am trying to alleviate that."